A & D Loan Acquisition and Development Loans are used in purchasing and developing
raw land with the intent of future development.
Abstract of Title A written history of ownership showing verification or non-verification
of title.
Acceleration Clause Requires the balance of a loan to become due immediately. Occurs
when regular payments are not made.
Acquisition Cost
The price to obtain property, including purchase price and all nonrecurring
closing costs, including discount points, FHA application fee, service charge,
credit report, FHA appraisal, escrow, document preparation, title insurance,
termite inspection, reconveyance and recording fees for FHA-insured loans.
Ad Valorem
A Latin phrase used to describe a tax charged in relation to the
value of the property taxed meaning "according to value".
Adjustable Rate Mortgage (ARM) A loan with an adjusted interest rated determined by a pre-selected index.
Adjustment Period The period between adjustments of an ARM interest rate. Back Up All-inclusive Trust Deed
Overriding trust deed; A financing tool where a lender assumes payments on
an existing mortgage or trust deed and takes from the borrower a trust deed
with a face value in an amount equal to the amount due on the old instrument
and the additional amount of money borrowed.
Amortization A financial obligation paid in installments; An amortized loan includes
both principal and interest, usually due monthly, resulting in complete payment
of the amount borrowed, with interest, by the end of the loan term.
Annual Percentage Rate (APR) The cost of credit including interest, loan fees and discount points
stated as an annual percentage.
Appraisal A licensed appraiser’s estimate of a property’s monetary value
on the open market; Justifies the contract purchase price.
Arrearages The total delinquent principal, interest, taxes and insurance owed.
Balloon Payment An installment payment on a loan that is usually a larger payment and
due on a specified date. Back Up Bond Real Estate Bond. An obligation issued on security of a mortgage or
trust deed.
Cap A limit on interest rate fluctuation on an adjustable rate.
Certificate of Reasonable Value Property appraisal necessary for a VA-guaranteed loan.
Certificate of Redemption Certificate issued by the county tax collector verifying payment of all
past due obligations.
Chattel Mortgage Using personal property to guarantee a promissory note.
Closing The ending of a real estate transaction resulting in title and fund conveyance. Back Up
Closing Costs Expenses resulting from the closing of a real estate mortgage loan.
Closing Statement Also known as a HUD-1 statement. Provides a listing of all funds payable
at closing.
Cloud on Title Encumbrance which affects the title marketability.
Compound Interest Interest payable on the principal loan amount and accrued interest.
Conventional Loan A secured loan that is not insured by FHA and VA loans. Back Up Cost Approach An Appraisal method to determine market value calculated by adding value
less depreciation to the replacement value.
Deed A legal document conveying title to real property.
Debt to Income Ratio Ratio comparing total monthly obligations, including home loan payments,
to total monthly gross income.
Discount Points Fee charged by the lender to decrease the interest rate on a loan. Back Up Due on Sale Clause Mortgage provision stating that the entire note balance is due if the
borrower sells the property.
Easement The right and use to a specific piece of land owned by someone else.
Encroachment A property improvement that unlawfully intrudes on another’s
property.
Equity Calculated by subtracting the balance owed on a home from the market
value. Back Up Escrow The holdings of documents or funds by a neutral third party on the behalf
of the borrower pending the closing of a loan or payment of real estate taxes,
insurance and any such agreements of a contract.
Escrow Impounds Money paid at loan settlement and with monthly loan payments for the
purpose of paying future real estate taxes and homeowners insurance.
Escrow Waiver The borrower’s request to not pay taxes and insurance through
impounds. Equity positions play a role in the decision.
Fair Credit Reporting Act Law protecting consumers that establishes procedures to correct errors
on credit reports and gives consumers specific rights in dealing with credit
reporting agencies. Back Up Fannie Mae (FNMA) The Federal National Mortgage Association. It purchases, sells and guarantees
conventional, VA or FHA mortgages.
Federal Home Loan Mortgage Corporation (FHLMC) Purchases conventional mortgage loans in the secondary mortgage market.
Federal National Mortgage Association (FNMA) Purchases mortgage loans from primary lenders in the secondary mortgage
market.
Federal Truth In Lending Act Requires disclosures about terms and costs intended to give consumers
cost vs. credit comparisons. Back Up FHA Federal Housing Authority. Provides home loan insurance for FHA loans.
Fico Score Enables a credit grantor to identify credit prospects with the best credit
opportunities.
Fixed Rate Mortgage The interest rate on a loan that remains constant throughout the entire
term.
Floating Interest Rate The interest on a loan before it is guaranteed by a lender.
Gift Letter A signed letter or statement from an individual providing a cash gift
to a borrower in order to qualify for a loan. The letter or statement states
that the cash gift does not have to be repaid. Back Up
Ginnie Mae Government National Mortgage Associations works with FHA facilitating
efficient secondary market activities for federally insured or guaranteed
mortgages.
Graduated Payment Mortgage (GPM) A mortgage based on payments that will be increased over time dependent
on a predetermined schedule.
Gross Income Multiplier Using the gross annual income of a property to calculate an estimate
of a property’s value.
Good Faith Estimate A document prepared by the lender showing borrowers the estimated cost
they will incur payable at closing.
Hazard Insurance Insurance policy placed on property improvements that covers damage by
fire or other natural disasters. Back Up HUD The United States Department of Housing and Urban Development. Responsible
for all facets of the federal housing and urban development programs.
Index A factor used to calculate the interest on an adjustable rate mortgage. Back Up Inheritance Taxes Taxes on real and personal property received through an inheritance.
Jumbo Loan A home loan that is monetarily more than the limits of Freddie Mac or
Fannie Mae.
Land Contract A contract used in a real property sale where the seller keeps the title
to the property until the sales price has been paid. Back Up Leverage Use of debt financing to purchase an investment.
Lien A legal hold against the property as security for the payment of a debt,
mortgages, judgments or taxes.
Loan to Value Ratio Ratio reflecting the mortgage loan amount to the appraised value or purchase
price of a home.
Market Value The highest price that a buyer is willing to pay and the lowest price
that a seller is to accept for real estate. Back Up Marketable Title Enables an owner to sell property without objection. It is free of any
clouds.
Mortgage A guarantee of real estate from a borrower as security for the payment
of a loan to a lender.
Mortgage Insurance Insures the lender against non-payment of a government or conventional
loan.
Mortgagee The lender for a home loan. Back Up Mortgagor The borrower in a home loan.
Negative Amortization A loan schedule in which the principal increases due to a payment that
does not cover all of the interest.
Notice of Default Written notice to a borrower showing default on a mortgage. Back Up Origination Fee Lender’s fee for processing and underwriting loan documents.
Usually 1 point or 1%.
PITI Principal, interest, taxes and insurance, which combined make a monthly
mortgage payment. Back Up Points A one-time payment to lower the interest rate on a mortgage.
Prepaid Interest The interest charged at closing calculated to pay for the cost of borrowing
for the remainder of the month.
Prepayment Penalty Fee paid by the borrower if loan is paid before its due date.
Pre-qualification A non-binding opinion of how much a borrower will be qualified to borrow.
Private Mortgage Insurance (PMI) Insurance required by lender from a non-governmental insurer if down
payment is less than around 20%.
Real Estate Settlement Procedures Act (RESPA) Requires advance disclosure to consumers about mortgage loan settlements. Back Up Redlining The illegal practice of lending institutions denying loans to certain
areas of a community.
Refinancing The borrower pays off one loan with another.
Reverse Annuity Mortgage (RAM) The homeowner receives monthly payments based on accumulated equity.
The loan must be repaid at a prearranged date or upon the death of the owner
or the sale of the property.
Right of Recission The borrowers right to cancel a mortgage refinance transaction within
three days from the date the settlement documents were executed.
Sales Comparison Approach The construction and locations of homes comparable to the subject home
are used to form an appraisal. Back Up Satisfaction Paying and being released from an obligation in its’ entirety
before the end of the term.
Second Mortgage Mortgage that has a lien position second to a first mortgage.
Secondary Mortgage Market Market in which investors buy and sell existing mortgages.
Security Instrument The deed of trust or mortgage verifying the pledge of real property as
security for the repayment of the debt. Back Up Servicing The operational procedures related to the collection of home loan payments
and other payments related to mortgage loans.
Shared Appreciation Mortgage (SAM) Loan in which the lender participates in any profits when the property
is sold.
Simple Interest Interest payable on the principal amount of the loan only.
Subrogation Substituting the legal rights and claims from one creditor to another.
Suspended A loan can neither be approved nor denied. More information is needed.
Takeout Loan Loan in which the lender provides financing to the builder or developer
upon completion of construction. Back Up Temporary Buydown Money paid at closing to temporarily reduce the interest rate for the
first and second year of the mortgage.
Title Insurance Insurance policy protecting owner or lender against loss affecting title.
Title Search An examination of public records to determine legal ownership of property.
Usury
Charging an interest rate greater than the rate permitted by law. Back Up Underwriting Analyzing a homebuyer’s ability to repay a home loan.
VA Loan A home loan guaranteed by the Department of Veterans Affairs. Enables
a veteran to buy a home with no money down.
VOD Verification of Deposit
VOM Verification of Mortgage
VOE Verification of Employment
Wraparound Mortgage A loan in which a new loan is added to the existing first mortgage loan. Back Up
